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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. MUx / Px = MUy/Py or MUx/MUy = Px/Py






2. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






3. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






4. The difference between total revenue and total explicit costs






5. The additional cost incurred from the consumption of the next unit of a good or a service






6. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






7. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






8. Ed < 1






9. Costs that change with the level of output. If output is zero - so are TVCs.






10. AFC = TFC/Q






11. All firms maximize profit by producing where MR = MC






12. The imbalance between limited productive resources and unlimited human wants






13. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






14. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






15. The most desirable alternative given up as the result of a decision






16. AVC = TVC/Q






17. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






18. The total quantity - or total output of a good produced at each quantity of labor employed






19. The difference between total revenue and total explicit and implicit costs






20. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






21. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






22. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






23. Ed = (%dQd)/(%dP). Ignore negative sign






24. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






25. The change in quantity demanded resulting from a change in the price of one good relative to other goods






26. Ed = 0 - no response to price change






27. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






28. Exists if a producer can produce a good at lower opportunity cost than all other producers






29. The additional benefit received from the consumption of the next unit of a good or service






30. Models where firms agree to mutually improve their situation






31. The lost net benefit to society caused by a movement away from the competitive market equilibrium






32. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






33. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






34. Exists at the point where the quantity supplied equals the quantity demanded






35. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






36. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






37. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






38. The rational decision maker chooses an action if MB = MC






39. TR = P * Qd






40. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






41. ATC = TC/Q = AFC + AVC






42. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






43. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






44. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






45. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






46. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






47. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






48. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






49. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






50. A firm that has market power in the factor market (a wage-setter)